More Patients Feel Pain of Surprise Billing Even After Going ‘In-Network’

Patients with health insurance often assume most of their medical costs will be covered when they visit the emergency room at a hospital that is part of their coverage network.

But new national research shows that at least one in five of these patients were still treated by an out-of-network physician, despite seeking treatment at an in-network facility. And these visits resulted in surprise medical bills that averaged more than $600 — but could cost consumers as much as $19,600 extra.

Yale University economists Zack Cooper and Fiona Scott Morton reviewed claims from more than 2.2 million visits to hospital emergency rooms nationwide between January 2014 and September 2015 as part of their effort to learn more about out-of-network bills. Concerns about surprise billing have grown nationwide as studies show that access to affordable healthcare remains a problem for many Americans despite efforts to expand insurance coverage.

Out-of-network insurance bills have become a hot topic in Trenton, with lawmakers seeking to implement additional regulations to curb a practice advocates said costs 168,000 New Jersey residents an extra $400 million in medical bills each year. The state also spent nearly $900 million on out-of-network claims for public workers last year, officials said in late October.

Insurers, hospitals, doctors, and patient advocates struggle for consensus on an equitable way to handle unexpected expenses

In an article published late Wednesday in the New England Journal of Medicine, the Yale researchers report that 22 percent of in-network emergency room visits still resulted in treatment from out-of-network doctors. While there is significant geographic variation — the rate was close to zero near Boulder, Colorado, and nearly 90 percent at hospitals near McAllen, Texas — Cooper said New Jersey rates were close to the national average.

This phenomenon is not widely known, the team writes, and there are “virtually no federal protections against surprise physician bills, and the response in most states has been inadequate.” The result is an unchecked system where the charges billed by specialists, and emergency room doctors in particular, continues to escalate, they said.

While a handful of states, including New Jersey, have passed laws designed to protect patients from aspects of these charges, only one state — Connecticut — has devised a system that can be effective in restraining prices, Cooper said. “There are really two issues: protecting the patient and the size of the bill,” he said.

In New Jersey, existing law protects patients from being billed by their insurance company for additional charges related to emergency treatment they receive at out-of-network sites, or from out-of-network providers that work at in-network hospitals, according to the state Department of Banking and Insurance. But hospitals and doctors can bill patients for the difference between in-network and out-of-network costs, although there are limits on the total dollar amount patients should pay. (The law does not apply to self-insured plans, like those held by large companies — and many hospitals — over which the state does not have jurisdiction, although DOBI said some plans chose to comply.)

Even if the patient is held harmless, the underlying problem of inflation remains, Cooper explained. As providers battle with insurance companies over the balance that is owed, costs escalate and we all pay more.

“It’s really good that the patients get protected,” Cooper said. “But laws that exclusively hold the patient harmless, but allow someone else to pay, only make the problem more egregious.”

The current proposal (A1952) — under development for nearly eight years — focuses on increasing transparency, further protecting patients, and establishing a clear process for resolving disputes between providers and payers. It also creates a cap on rate disputes. Versions have been approved by Assembly and Senate committees, but the measure remains highly controversial.

As drafted, it would require doctors and hospitals to make public the rates they charge for standard procedures, update these regularly, and spell out what insurance networks they participate in. The measure ensures patients are always held harmless and requires hospitals and insurance companies to settle the payment dispute at rates that range from 90 percent to 250 percent of what Medicare pays for a procedure. (Once again, it does not apply to self-funded plans, although they can opt to follow the same guidelines.)

While they also support greater disclosure, representatives of the New Jersey Hospital Association have opposed the current cap proposal. Instead, they favor a plan that would ensure out-of-network charges don’t fall on the patient, regardless of the network status of the physicians who treat that person, but doesn’t limit the negotiations between providers and payers. “This puts the onus on hospitals to ensure specialty groups don’t balance bill,” Neil Eicher, a vice president with NJHA testified at an Assembly hearing in late October.

Kerry McKean Kelly, who heads communications for the NJHA, said their plan would provide one of the strongest protections nationwide. “We remain hopeful that we can reach a place of agreement on this issue because these protections would achieve the goal of insulating patients from surprise bills,” she said.

But Cooper said controlling costs is essential to any real solution. As an economist, however, he’d prefer a plan that sparked fair market competition instead of one based on government-set caps. “Ultimately, surprise out-of-network billing is the result of a market failure: the lack of a competitively set price for physician services,” the researchers wrote.

Under the current system, specialists — and emergency doctors in particular — appear to have significant leverage over their payments, the researchers found. Nationwide, in-network internists were paid 158 percent of Medicare rates; orthopedists earned 178 percent; and emergency room doctors billed 297 percent. But out-of-network doctors were paid 798 percent of Medicare rates for their work, on average.

Cooper and Morton recommend instead that states require hospitals to negotiate with insurance providers for rates that cover a bundle of services, including their operational costs and any physician charges. These agreements could then be used to set physician payments and doctors that didn’t like the deal could go elsewhere, they note.

“We don’t chose the hospital and doctor separately,” Cooper said. “Why should it be billed separately?” He likened the current scenario to paying the bill for dinner and then getting a separate charge for the breadbasket a week later.